Friday, September 30, 2011

Who wants to be a millionaire, anyway?

You know, it generally takes a long time to be a millionaire.

Granted, we all have visions of sugarplums danced before our eyes in the form of rock stars, celebrities, athletes, business tycoons who were in the right place at the right time, even lottery winners. But in general, it takes a long time to achieve that measure of wealthy we think a millionaire to be.

Is this news to you? Do you know that you have the opportunity to become, over time, a millionaire? To become wealthy?

If you don't believe its possible, you probably assume that these millionaires are beyond you; that they have something you can't; that they must have somehow oppressed others to achieve this impossible dream.

So here's how to be come a millionaire:

Don't spend all of your money.

I'm not being flippant here, just pointing out that if you don't eat all your candy on Halloween night, you'll still have some the next morning.

Something to think about: your current net worth is the sum total of all your adulthood's financial decisions and a fair judgement of their wisdom. So add up the value of what you have and subtract what you owe and post that number on the fridge as a reminder. I do hope it's a positive number.

Save what you don't spend.

You've heard the phrase "pay yourself first." Savings gain a momentum through a combination of regular investing, return (growth) and time. You can control the regular investments and the time. Do it early and do it often.

Investment growth is the opposite of debt growth. Multiply out a mortgage payment by the number of years on the mortgage and you'll see that the price of the house is much more than the mortgage amount.

Have the discipline to say no. It's not easy to deny yourself something that you can have just by signing up for a payment on it. As I've detailed elsewhere, a brand new, inexpensive car at age eighteen will end up costing you about a million dollars. Huh. A million just sitting there in a fancy Honda Civic.

Stay the course for thirty or forty years. You know, throughout your working career.

Did you know you're responsible for your own retirement?

Did you know that you should retire when you can afford to, not when you decide to?

Ding! You're a millionaire. Did you oppress someone along the way, you greedy bastard?

Who are these millionaires? Most millionaires are at the far end of this 30-40 year cycle. They followed this plan of not spending all they had, of investing (and investing more as their incomes grew- which also tends to happen as you get older), of staying the course for a long time.

In other words, most of the millionaires are old people. They saved this money so that they would have something to live on when they stopped earning an income. They took care of themselves so they wouldn't be a drain on society. You can do the same.